Gensler Delivers Remarks on Artificial Intelligence in Finance

SEC Chair Gary Gensler delivered a speech highlighting the importance of artificial intelligence (AI) and its implications for financial markets and regulation. He emphasized that AI has the potential to transform markets, offering benefits such as improved efficiency, lower costs, and enhanced risk management. Chair Gensler also spoke about the risks associated with AI, including potential biases, cybersecurity threats, and market manipulation.

Chair Gensler discussed how AI is already being used in various financial market activities, including trading, risk management, and customer service. He noted that AI algorithms are becoming increasingly complex and opaque, making it difficult for regulators to understand and oversee their operations effectively. Chair Gensler also highlighted the potential for “AI-washing” noting, “[i]nvestment advisers or broker-dealers also should not mislead the public by saying they are using an AI model when they are not, nor say they are using an AI model in a particular way but not do so.”

The Chair emphasized the need for regulators to adapt to the rapid pace of technological change and develop new tools and techniques to monitor and regulate AI-driven market activities. He also called for greater transparency and accountability in the development and deployment of AI systems to mitigate the potential for biases and discrimination, particularly in areas such as lending and credit scoring. He further warned that AI systems are vulnerable to cyber-attacks and manipulation, which could have serious consequences for market stability and investor confidence.

Click here to read Chair Gensler’s remarks at the Yale Law School.